Walmart plans more hypermarkets

Walmart China will continue to grow hypermarkets and high-end membership format Sam's Clubs in the next three years even as it further develops its home delivery and e-commerce business in the country, top company officials said on Wednesday.

Greg Foran, head of Walmart Asia and former president and CEO of Walmart China, said on Wednesday in his first media interaction after being appointed to the new role, that "China has the opportunity to become the second-biggest market for the retailer, after the United States."

"The future is also clear that we want to continue hyper-markets and Sam's clubs. We have started to understand how to use mobile channels more effectively. In the future, mobile channels will complement our stores," said Foran.

He added that Walmart has plans to further develop its home delivery services that offer free delivery within a radius of 2 km if the shopping goods purchased are more than 188 yuan ($30.17).

The retailer also plans to enhance its e-commerce business for Sam's Clubs, which since its launch has been successful.

According to Foran, distribution centers set up by Walmart in China have played a significant role in buoying market share and profitability in the country during the past three years. Instead of delivering directly from suppliers or distributors, an increasing number of items are going through centralized distribution centers to save supply chain costs and to ensure con-sumer confidence in quality and safety of goods.

"By the end of this year, every store and club in the country will be receiving regular deliveries from the 20 distribution centers," said Sean Clarke, CEO of Walmart China and former chief operating officer in the country.

"It is not just about building a network. It is how we use it. By the end of this year, 85 per-cent of the non-fresh items and 50 percent of fresh items in our stores will be delivered through our network. No one else can do that in China," said Clarke.

Walmart's distribution centers will allow the retailer to have the ability to be confident about the products it sources, especially from quality and standards perspectives. Citing an example, Clarke said, retailers can test fresh food in the distribution centers before sending it to the stores. Secondly, distribution centers help in reducing supply chain costs, cutting store inventories and lower product prices, he said.

Ben Cavender, an analyst at the Shanghai-based China Market Research Group, said Walmart is starting to take steps in the right direction by focusing on high-margin formats such as Sam's Clubs and enhancing its online business.

Walmart's efforts to stay profitable by closing loss-making stores and developing the rest will also help maintain its position in China's retail market, which is getting tougher due to rising costs, including those for labor, said Cavender.

The transition in leadership positions in Walmart China should be looked at as continuity, said Foran, adding that being connected with China is the most important component of his new position at Walmart.

"We have businesses in Japan and India," said Foran. "But about 75 or 80 percent of my time is with Sean and his team in China, It is the most important part of our business."

Foran's two years as the top executive of Walmart in China was significant as the retailer announced several steps to improve store quality, enhance supply chains and ensure food safety.

Walmart China also announced on Tuesday that the company will triple its food safety investment to more than 300 million yuan by 2015, from the 100 million yuan announced earlier.

Walmart reported annual sales growth of 24.5 percent last year in China and was also among the top three retailers in the country, according to a recent industry report. Walmart increased its store units by 3 percent in China last year and said it plans to open 110 new facilities in the next three years.

Closures of unprofitable outlets accounted for 9 percent of Walmart's total store portfolio and for 2 to 3 percent of the total sales volume through next year. Walmart will continue seeking steady growth and quality development in China, it said.